The DTC: When Someone in the Family is Very Sick

When someone in the family is very sick – and markedly restricted in their daily living activities — the tax system can help with some financial relief to pay for the costs of care. One of the most lucrative of the various tax provisions is the Disability Tax Credit (DTC). In fact, it can amount to over $2,000 a year in some cases. But, claiming it is subject to significant scrutiny by the CRA, so it’s worth a trip to see a DFA-Tax Services Specialist™ for help. Here’s what you need to know:

The Disability Tax Credit is a non-refundable credit found on Schedule 1 of the T1 Return. To claim it, form T2201 Disability Tax Credit certificate form must be completed by a nurse practitioner or a doctor.

A disabled dependant for the purpose of this credit is defined as one who has a “severe and prolonged impairment in mental or physical functions.” This includes the following:

1. Seeing: the patient is blind

2. Speaking: the patient is unable to speak or takes an inordinate amount of time to speak so as to be understood by another person who is familiar with the patient, all or substantially all of the time (which typically means at least 90% of the time)

3. Hearing: the patient is unable to hear all or substantially all of the time (at least 90% of the time)

4. Walking: even if, with appropriate therapy, medication and devices they are unable to walk or take an inordinate amount of time to walk 90% of the time

5. Eliminating, feeding, dressing

6. Mental Functions: the T2201 form goes into significant depth in explaining what constitutes eligible challenges with mental functions required for everyday life. For example, those with adaptive functioning, memory issues, problem-solving, goal-setting and judgement, at least 90% of the time.

7. Life-sustaining therapy: here the patient must meet two qualifications:

a. The therapy is required to support a vital function, even if the therapy has eased the symptoms.

b. The therapy is needed at least 3 times per week for an average of at least 14 hours per week. This includes only the time dedicated to the therapy, in which the patient must take time away from normal activities. Special rules apply for children; that is if they cannot do the activities related to the therapy because of their age, their caregiver must do them or supervise them.

When a taxpayer claims expenses for an attendant or the cost of nursing home care for a patient as a medical expense, neither that individual nor any other person may claim the Disability Tax Credit (DTC) or transfer it from that patient. But, the DTC can still be used if the claim for an attendant is less than $10,000 ($20,000 in the year of death).

Expenses claimable for these purposes can include fees paid for nursing home residence, full-time care in-personal residence, or care in a group home plus costs for a special school or detox centre, which may qualify as both medical expenses and tuition fee credits. But this generally does not include “stop smoking” treatment unless part of a medical treatment prescribed and monitored by a medical practitioner.

The value of the Disability Tax Credit is as follows in 2019:

• Base Credit $8416
•  Supplementary Amount for children $4910 (Reduced by a Base Child Care Amount of $2875)

Remember, too that missed DTCs can be reclaimed by adjusting tax returns for up to 10 years back. If the taxpayer qualified, missed it and was taxable in each year, a return of over $20,000 would be possible. However, if the patient was not taxable, the DTC can be transferred to a qualifying individual who is and who can use the credit to offset taxes payable.

Your tax specialist can compute the real dollar value for you when both federal and provincial tax rates are applied. For most adults, this will be just over $2,000 per year.

Evelyn Jacks is President of Knowledge Bureau and best-selling author of over 50 books on personal tax savings including her latest, Essential Tax Facts 2019 Edition available in the Knowledge Base at www.knowledgebureau.com

Additional educational resources: Enrol in the DFA-Tax Services Specialist™ program today, or take a free trial.

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